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Why You Should Invest Sustainably When Building Your Portfolio

Investing is about making choices with the intention of achieving a desired outcome. We all have different risk profiles and time horizons, so there is no one-size-fits-all solution to investing.

Different people are comfortable with different levels of risk and invest accordingly. Similarly, not everyone shares the same set of values when it comes to what they want their money to stand for. Some people prefer to invest in companies that operate in a way that aligns with their beliefs. This is what is referred to in the market as sustainable investing.

What Is Sustainability Investing?

Source: hbr.org

Sustainability investing is a risk-controlled investment strategy that aims to generate financial returns while producing positive environmental and social outcomes. It’s a long-term strategy focused on the transformation of society towards sustainability.

Sustainable investing can be applied to a broad range of asset classes including stocks, bonds, real estate, private equity, and commodities.

There are many different types of sustainability metrics that investors can look at to ensure they are investing sustainably. These metrics can vary from a company’s carbon footprint to the gender diversity of its management team.

Read on to learn about this growing segment of the market and why you should invest sustainably when building your portfolio.

Why You Should Care About Sustainability When Building Your Portfolio

If you’re not yet sold on the importance of sustainable investing, here are some of the many reasons why you should care.

1. Sustainable Investments Help The Environment

Source: forbes.com

First and foremost, sustainable investments help to protect the environment. As the world’s population grows and demand for resources increases, investors are looking for ways to reduce their carbon footprint.

Sustainable investments, such as renewable energy, can help to reduce greenhouse gas emissions by as much as 90% and reduce climate change, which is one of the biggest global health threats of our time.

Sustainable investments also help to protect natural resources, such as fresh water, which is an essential part of human health and well-being. And it’s not just us who stand to benefit.

Protecting natural resources such as fresh water and clean air means protecting the ecosystems that wildlife inhabit. This is particularly important at a time when the world’s wildlife is facing unprecedented levels of extinction.

Investors Have A Voice Through Sustainable Investment

Source: milltrust.com

Investing in companies that operate with a sustainable approach provides an avenue for investors to voice their concerns and call attention to specific issues.

For example, if a company is planning to build a factory in a country that has lax labor laws, investors can express their concerns through their investments. They can send a message to company management that they don’t support such practices. This will compel the company to change its plans., which can be a win-win situation for both investors and the local community where the factory would have been built.

Sustainable Investing Is Lucrative

Source: online.hbs.edu

Investing sustainably is more than just doing something that’s good for the environment. It can also be very lucrative in the long-run.

Studies show that sustainable companies are more financially successful than their mainstream counterparts. This is because they are more efficient and often have less financial risk than their mainstream counterparts. As a result, sustainable companies often have higher market values and are often less reliant on finite resources, making them less likely to be significantly impacted by resource shortages.

Sustainable companies also generate more revenue since people are willing to pay more for goods and services that are ethically sourced and environmentally friendly.

The Bottom line

For many people, investing feels like a risky game; one that is filled with potential pitfalls and danger. With the media continually highlighting the market’s highs and lows, it’s no wonder that so many potential investors are put off from dipping their toes into the water for fear of losing their shirt.

But investing in sustainable companies is a great way to make a positive impact while growing your wealth. The key lies in understanding why you should invest sustainably when building your portfolio.

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